Project Fuels German Fears of Energy Dependency on Russia

When German Chancellor Angela Merkel, Russian President Vladimir Putin and their respective cabinets meet for talks in the Western Siberian town of Tomsk on Wednesday, the current nuclear crisis with Iran is expected to be a major topic of discussion.

But the two leaders are also expected to attend the signing of an agreement between Germany's BASF and E.ON companies and Russia's state-owned Gazprom to develop the Yuzhno-Russkoje gas field with reserves sufficient to meet Germany's demand for seven years.

The gas will reach Germany via a new Baltic Sea pipeline that the three companies are building. While Russian gas currently accounts for about 35 percent of German gas imports, the amount will increase by 5 percent when the pipeline is completed.

Flexing muscles

Some described the deal as a further step to secure Germany's gas supply in the long term, but energy experts worry that it will only increase dependency on Russia's resources.

Such concerns were fuelled last week when Gazprom officials hinted that they could sell their gas to Asia and North America if European countries refused to let the company enter their markets. Russia's oil pipeline monopolist, Transneft, followed suit shortly after.

While Gazprom officials have since tried to placate the situation by saying that they did not mean to threaten or blackmail the Europeans, a German government spokesman described the original statements as "not helpful" and energy experts called on Merkel to bring up the issue in Tomsk.

"Strong criticism is called for," said Claudia Kemfert of the German Institute for Economic Research, adding that Merkel's government had a more realistic assessment of the dangers of relying largely on Russian gas than her predecessor, Gerhard Schröder, who now chairs the supervisory board of the Baltic Sea pipeline project.

"The government has to be interested in securing Germany's energy supply," she said. "If the Russians would rather sell to the Chinese, we need to know to look for alternative suppliers."

A long-term interdependence

But Kemfert also agreed with others that Russia was highly unlikely to shut down its pipelines to Europe in the near future.

"Russia and Europe are dependent on each other," said Friedemann Müller, an energy expert at the German Institute for International and Security Affairs. While it would take decades for Gazprom to build pipelines to Asia, Europe's demand for gas would still outstrip Chinese and Indian orders by far, he added.

"That's why Russians need the EU as a market in the long term," Müller said. "But that doesn't keep them from flexing their muscles" to prevent Europeans from looking for alternative energy sources and keep their own pipelines in business.

The result is a vicious circle as Europe, in return, needs to find new suppliers to meet energy needs.

"We cannot rely on one supplier," Müller said, adding that Germany had neglected alternatives, such as ports for ships carrying liquefied gas, for too long.

Short-term business interests

A new pipeline to connect the massive gas fields of Turkmenistan and the entire South Caspian region with Europe was another crucial step to decrease dependency on Russia, Müller said. But such an endeavor would only help in the long run: A few years ago, Russia bought up Turkmenistan's gas production up to the year 2020.

EU officials wanted to secure Turkmenistan's gas supplies in the 1990s, but the business interests of German energy companies played a role in preventing this, Müller said.

"Companies here were not interested in diversification, because they were making good business with Gazprom," he said.

Kemfert agreed with Müller that liquefied gas and new pipelines to non-Russian gas fields should be pursued. But she also added that Europeans had to look beyond fossil fuels to meet their future energy needs.

"We have to get away from oil and gas and push renewable energies," she said.